Academy

The Ultimate Showdown - SOC 2 Type 1 Vs. SOC 2 Type 2

Eden Amitai
June 28, 2021

Newbie to SOC 2?

If this is your first time preparing for a SOC 2 audit, you already know that it’s an important marker of your business’s security posture and maturity. But there are a LOT of little details that first-timers, and maybe even experienced teams, may not know about.

In this post we’ll explore one important element you’ll need to dig into before getting too deep into your SOC 2 prep—the difference between SOC 2 Type 1 and SOC 2 Type 2.

But before we start, let’s recap; SOC stands for Systems and Organization Controls. This is a set of audit frameworks established and governed by The American Institute of Certified Public Accountants (AICPA).  SOC reporting is based on Statement on Standards for Attestation Engagements (SSAE) No. 18, and is broken into three parts—SOC 1, SOC 2, and SOC 3.

SOC 1 reports deal with a company’s operational controls when providing financial-related services (i.e.: consolidating bank statements, salary calculation, etc.). Based on AICPA’s 5 Trust Service Criteria (Security, Availability, Processing Integrity, Confidentiality, and Privacy), SOC 2 reports address the effectiveness of a company’s data protection and security measures and controls. SOC 3 reports are similar to SOC 2 but can be publicly shared.

SOC 2 is one of the more common reports companies prepare for and the goal is to demonstrate that a business is doing everything in its power to protect and secure customer data. In recent years, it has become one of the most important compliance frameworks and applies to nearly all businesses that collect, process, store, and share customer data.

Having a SOC 2 report signed by an accredited accounting firm signals to potential customers and vendors that security is of paramount importance to your company. But it’s important to note that SOC 2 comes in 2 types; Type 1 and Type 2. Though both are based on the AICPA’s 5 Trust Criteria, they are different reports which serve different purposes.

Type 1 - The Short Sprint

Type I reports address a company’s security design at a specific point in time. These reports enable potential vendors, customers, and partners to assess whether the company in question can meet their chosen Trust Criteria.

The purpose of this report is to act essentially an “as of” report, providing a view of the practices and management in place—without the processes and policies—as of a certain date. It looks at whether the controls in place would be sufficient to claim that, as of now, the company does have proper security measures in place.

This type of report is limited in scope and therefore applications, but has some compelling use cases; Type 1 reports can come in handy when companies need a report as soon as possible and it may be a good choice for companies going through their very first SOC 2 audit process, though that’s not necessarily the case.

Type 2 - The Long Haul

SOC 2 Type 2 reports address a company’s security design over a period of time. This report is also based on the company’s chosen Trust Criteria and closely examines the internal control practices and policies over an extended timeframe, usually the past year.

The purpose of Type 2 reports is to demonstrate that the company in question views security as a priority and has adopted a security-first state-of-mind at all stages. This is achieved by displaying the richness of the policies and procedures and the relevancy of the implemented processes that follow. Additionally, the auditor must test the effectiveness of the controls, to ensure they work properly and provide the same results over time.

Preparing for SOC 2 Type 2 is a much more in-depth and time-consuming process than preparing for a Type 1 audit. But it should come as no surprise that it’s far more valuable and is considered to be the gold standard in compliance attestation.

Which is Best for Your Business?

Feeling overwhelmed at the intricacies and nuances associated with SOC 2 audits? Totally understandable. It’s a lot to wrap your head around, even for experienced teams. In that light, it becomes clear why teams choose to start with SOC 2 Type 1 reporting. It’s a relatively simple and fast report to prepare for and moreover, it may be just what your prospects are looking to see.

On the other hand, if you have the tools and resources, SOC 2 Type 2 will serve your company better in the long run. It’s not only an important report to have in hand, it’s an important indicator of your company’s commitment to adopting a security-first mindset. It’s proof that your company puts security first, throughout all your processes and procedures. And at the end of the day, that’s what really matters. Having a SOC 2 Type 2 report isn't necessarily a bulletproof strategy to prevent breaches—but it sure makes them less likely to severely impact your customers in case they do occur.

Whether you choose Type 1 or Type 2, what matters is establishing that security-first mindset. Stick with us as we explore where security and compliance meet, creating greater resilience across organizations.

Eden Amitai
Love Technology, User Psychology, and Marketing. Believe in working hard to play hard. Director of Product Marketing at anecdotes.

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